The Omega Investment Corporation has more than half a million dollars to invest as the result of a recent windfall gain from the revaluation of a foreign currency it was holding. Failing all else, these funds can be invested in government bonds, which are considered to be risk free, at 8 percent per annum. Omega is evaluating four other investment projects as well. These projects seem to be equally risky, and Omega feels they should return at least 10 percent per annum in order to be considered an equivalent proposition to placing the funds in the risk-free bonds. The initial outlays and net cash flows after taxes (NCFAT) for each year of each project’s life are as follows:

You are asked to advise Omega about which of these projects, if any, it should undertake. Explain your reasoning.

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A B C D Project (S) ($) ($) ($) Initial outlay 100,000 135,000 85,000 122,000 NCFAT Year 1 -12,200 26,300 56,000 -25,000 Year 2 -8,500 34,400 32,000 10,600 Year 3 76,600 48,600 18,600 48,200 Year 4 62,400 56,500 12,400 96,500 Year 5 23,500 22,000 5,500 34,000 Year 6 9,500 10,000 0 18,700